Taxing time for Government as Birmingham demands financial freedom

Birmingham has joined nine other British cities in a campaign to convince the Government that councils and city regions should be able to levy and spend taxes raised in their area.

The move to a US-style of governance where cities and regions have full power over finances and local public services is proposed by the Core Cities group – Bristol, Sheffield, Glasgow, Birmingham, Leeds, Manchester, Liverpool, Nottingham, Cardiff and Newcastle.

City leaders want to take advantage of an all-party agreement to promote devolution for English regions following the Scottish independence referendum.

At the moment councils set and retain only the council tax raised locally, which amounts to a very small percentage of local authority spending. The majority of council spend comes from ring-fenced Government grants leaving no leeway for local decision making.

Cities like Birmingham can now take advantage of business rates uplift in enterprise zones – effectively borrowing money for regeneration against income generated by new businesses moving into development areas.

But Core Cities wants to go much further and is proposing a ‘new Magna Carta’ to set out the independence of local government from Whitehall in law – and, with it, the freedom to set and spend their own taxes.

The Core Cities call for greater powers came as West Midlands Police, the largest force outside of the Met, said it would raise its portion of the council tax by 1.99 per cent – the highest permitted by the Government without the need to hold a referendum.

The increase is equivalent to just over £2 a year, or 4p per week for Band D households.

West Midlands Police and Crime Commissioner David Jamieson said: “Unless future Government funding decisions are even harsher than we expect, this increase should allow us to continue recruitment of police officers – thereby temporarily halting the decline in officer numbers – and recruit some staff to keep officers on the streets.

“I will continue to make careful use of reserves to absorb the worst impact of the Government’s austerity cuts.”

Mr Jamieson’s decision follows last week’s announcement by the Home Secretary of a £23 million cut in the West Midlands Police grant for 2015-16, on top of cuts of £120 million since 2010-11.

Birmingham, Solihull and the Black Country councils will be hoping for a measure of devolution whoever wins the General Election, but the ‘northern powerhouse’ councils of Greater Manchester, Liverpool and Sheffield are almost certainly way ahead in the queue.

It seems highly unlikely that Birmingham will be entrusted with tax-raising powers until the main criticisms of the Kerslake Review are addressed. Kerslake criticised the city council’s “poor decision making” over many years.

Greater Manchester will be one of the first city regions to be freed from Whitehall shackles according to the combined authority leader Sir Richard Leese.

He said the extension of the Metrolink was an example of a decision the city should be able to take alone. “That should be a decision we ought to be able to take wholly within Greater Manchester and fund wholly within Greater Manchester. It’s not the sort of thing we should be having to go to central government to get permission and money for.”

The Core Cities group recognises that it will be difficult to persuade the Treasury to back devolution.

Chris Murray, the group’s director, is preparing a report on the potential for independent city states to make their case, due to be published with the right-leaning think-tank ResPublica next year.